SummaryFor Bharatiya Mahila Bank critical input: How to lend to women who do not have collateral to back their loans.

For the Bharatiya Mahila Bank, the country’s first pan-India national women’s bank, it is a humble rural cooperative women’s venture in Maharashtra that has provided the critical input to succeed: How to lend to women who do not have collateral to back their loans.

Chetna V Sinha, founder and chairperson of Mann Deshi Mahila Sahakari Bank, explained that this is the prime weakness in giving loans to women. The cooperative bank got around the problem by asking the woman’s husband to give an undertaking that his wife is a partner in the property and that she is taking the loan to develop her household. This is the same technique the Bharatiya Mahila Bank plans to adopt. In fact, it is Sinha who advised the new bank to do so. To become a part of the financial inclusion story, it is essential that the bank adopts this hybrid model as banks otherwise give loans only against single, unencumbered property rights.

“It is wrong to say that women do not have collateral as even if the property is not in her name, she does have a part in it,” Sinha said.

Mann Deshi Bank had approached then Bombay High Court judge CS Dharmadhikari in 2000 for a legal opinion on the issue before the bank rolled out the special system for lending. And with a repayment rate of 98%, it has demonstrated this is a feasible option.

The Bharatiya Mahila Bank, promised in this year’s Budget, is to be inaugurated on Tuesday.

“The domestic dynamics of gender bias tends to affect banking rights, too. We have tried to overcome this problem in all our services. For instance, we find electronic passbooks suit women better,” she said.

Started in 1997, the Mhaswad, Satara-headquartered Mann Deshi Bank is run exclusively for and by women. Apart from loans, it also provides financial services including savings bank accounts, doorstep banking, and pension and insurance products to women in the region.

With short-term and long-term loans, loans against gold, housing loans, group loans as well lending for consumption needs such as weddings and for buying livestock, Sinha’s bank also gives a 1% rebate on interest to women who own property.

“Men are welcome to open savings bank accounts but it is only women who are eligible for loans,” said Sinha, who was recently awarded the 2013 India Social Entrepreneur of the Year award by The Schwab Foundation for Social